ORIGINAL PUBLICATION HERE
by Charlie Thomas, Managing News Editor at Insurance Insider
The pattern of long-term institutional investors buying into the (re)insurance sector continued last week, with pension fund investors Canada Pension Plan Investment Board (CPPIB) agreeing to buy into Enstar.
The deal – announced late on Friday (29 May) – sees the pension plan buy 1.9 million voting and non-voting ordinary shares, equivalent to a 9.9 percent stake, from private equity firm First Reserve. CPPIB will also receive a seat on the board.
Enstar CEO Dominic Silvester said CPPIB would be a “valuable partner” for the legacy-to-live Bermudian.
While investing in run-off businesses inevitably means uneven financial results, Enstar has enjoyed a bright start to 2015, reporting consolidated net earnings of $44.8mn for the first quarter of the year – up 51 percent on the prior year period.
It was also an expansive quarter for Enstar, completing the acquisitions of Belgian insurer Nationale Suisse Assurance, Wilton Re Life Settlements and South Carolina-based Sussex P&C Insurance Company.
This isn’t the first time the $254.6bn Canadian pension fund manager has invested in our sector: in 2014, CPPIB bought life reinsurer Wilton Re for $1.8bn from a group of investors led by Stone Point Capital, Kelso & Company, Vestar Capital Partners and FFL.
Indeed, Canadian pension investors in general have been increasingly investing in (re)insurance over the past few years – Ontario Teachers owns Lloyd’s insurer ANV, and is a well-known buyer of insurance-linked securities and cat bonds, while the Public Sector Pension Investment Board (PSP) bought around a third of Amwins in March this year.
Canadian pension plans have long been held up as one of the eminence grises of institutional investing, as having no political interference, no funding deficits and their colossal scale allows them to take long-term strategic views on their holdings.
Long-term, strategic investors are also less likely to be spooked by a few catastrophe events. In other words, the industry may be bloated by the curse of too much capital, but the influx from the likes of CPPIB, Ontario Teachers and PSP is still – on balance – a good thing.